Restriction on Contribution to political party Companies Act 2013

Politics in India goes hand in hand with business, and business men are always looking for various favors from the political party which forms the government. This is not a one sided affair, even the political parties are hungry for some pre-election support for the corporates. With the lok sabha election nearing the first half of bargain would be at its peek. 

Due to lack of transparency in the functioning of political parties the Companies Act 2013 has brought about some amendments with regard to contributions made to political parties.

The companies act 1956 had some provisions governing the contributions, however to ensure further transparency the the following provisions have been introduces by the Companies Act 2013 –

Section 182 of the Companies act, 2013 –

Notified with effect from 12th September 2013 provides for prohibitions and restrictions regarding political contributions. Salient features of this section are given below:

1) Government companies and companies in existence for less than 3 years are not allowed to make any contribution to political parties. Hence, the following provisions are related to all companies except government companies and companies in existence for less than 3 years.

2) The maximum amount that a company can contribute to political parties in year shall not exceed 7.5% of its average net profits during the three preceding financial years;

3) Before making the contribution, the Board should approve of the same by way of resolution passed at its Board meeting;

4) Subscription, donation or payment made to a person who is carrying on such activity which affects public support for a political party shall also be deemed to a contribution to a political party;

5) Expenditure incurred directly or indirectly by a company on a publication, souvenir, journal, pamphlet for or on behalf of a political party shall also be construed as making a contribution to a political party;

6) Every company should disclose in its profit and loss account any amount contributed to a political party in any financial year, giving the particulars of the total amount contributed and also name of the political party;

7) If a company makes a contribution in contravention of the provisions of section 182, then the company shall be punishable with a fine which shall not be less than 5 times the amount so contributed and also every officer in default is liable to imprisonment for a term which may extend to six months and also fine of 5 times the amount so contributed.

8) Political party means a party registered under section 29A of the Representation of People’s Act, 1951

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